The "Extend" in "Embrace, Extend, Extinguish" is adding features and functionality to the embraced standard. They then push this extended standard into all their products, so that there exists compatibility issues with any version of a product meant to interact with the base standard.
This gives open source and other competitors' alternatives to Microsoft products the appearance of being shitty because they can't deal with Microsoft's non-standard bullshit, which is where the "Extinguish" part is achieved.